Illinois blocked from $3 billion

Punitive damages given up: Judge

A Cook County judge temporarily blocked Illinois from collecting $3 billion in punitive damages from Philip Morris USA in a class-action claim the company lost over sale of its light cigarettes.

Circuit Judge James F. Henry ruled Tuesday that the state relinquished claims it could collect from tobacco companies when it entered into a pact with 45 other states in 1998--known as the Master Settlement Agreement.

Under that agreement, the states are expected to receive $206 billion--about half of that from Philip Morris--over 25 years. Illinois' share is between $7.4 billion and $9.1 billion.

Philip Morris' attorneys said the decision was significant because it should reduce the bond the company must post to appeal the lawsuit it lost in Madison County, Ill., on March 21. The punitive damages were part of a $10.1 billion verdict against the maker of Marlboro for deceiving Illinois smokers into believing light cigarettes were safer than regular varieties.

The temporary restraining order is in effect for at least 10 days. Henry said a hearing will be held on whether to issue a permanent injunction.

Illinois Atty. Gen. Lisa Madigan, whose office opposed the temporary restraining order, appeared unfazed by the ruling. "It's not a setback at all," she said. "The state could not enforce this [the punitive damages] even if we wanted to."

Madigan said she opposes legislative relief aimed at reducing the bond Philip Morris must post to appeal the Downstate case as long as judicial proceedings are continuing.

Henry was careful to point out that his ruling had no effect on the size of the bond in Madison County. He said the Madison County judge has the discretion to set the bond as he sees fit.

The Downstate court ordered Philip Morris to put up $12 billion while the company appeals the verdict. The company contends it cannot pay the money and has suggested that if the bond requirement is not reduced it might have to file for bankruptcy.

The Madison County judge appears to be listening. In a hearing Tuesday on Philip Morris' motion to reduce the bond, Judge Nicholas Byron said the company may have other options, including a "guarantee" from its parent, Altria Group Inc. He did not elaborate.

"I want to see this company appeal," he said. "I don't want to put the company out of business."

The hearing ended with the judge encouraging lawyers for Philip Morris and the plaintiffs to seek a compromise. Private negotiations will resume Thursday, said Stephen Tillery, the lead plaintiffs' attorney.

"The judge is doing what he thinks is in the best possible interests of the class and Philip Morris," Tillery said in a conference call with reporters after the hearing.